Note 6 - Leases and Other Commitments and Contingencies

9 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note 6. Leases and other Commitments and Contingencies

(a) Leases. The Company has operating and finance leases for its corporate and sales offices, warehousing and packaging facilities and certain machinery and equipment, including office equipment.  The Company’s leases have remaining terms of less than 1 year to less than 5 years.

The components of lease expense for the three months ended March 31, 2024 and 2023, were as follows:

	Three months ended March 31,
	2024						2023
	Related Party - Vitamin Realty		Other Leases		Totals		Related Party - Vitamin Realty		Other Leases		Totals
Operating lease costs	$	211	$	42	$	253	$	211	$	53	$	264
Finance Lease Costs:
Amortization of right-of use assets	$	-	$	3	$	3	$	-	$	3	$	3
Total finance lease cost	$	-	$	3	$	3	$	-	$	3	$	3

The components of lease expense for the nine months ended March 31, 2024 and 2023, were as follows:

	Nine months ended March 31,
	2024						2023
	Related Party - Vitamin Realty		Other Leases		Totals		Related Party - Vitamin Realty		Other Leases		Totals
Operating lease costs	$	632	$	123	$	755	$	632	$	99	$	731
Finance Operating Lease Costs:
Amortization of right-of use assets	$	-	$	9	$	9	$	-	$	9	$	9
Total finance lease cost	$	-	$	9	$	9	$	-	$	9	$	9

Rent and lease amortization costs are included in cost of sales and selling and administrative expenses in the accompanying Condensed Consolidated Statements of Operations.

Operating Lease Liabilities

Related Party Operating Lease Liabilities.  Warehouse and office facilities are leased from Vitamin Realty Associates, LLC (“Vitamin Realty”), which is 100% owned by the estate of the Company’s former chairman, and a major stockholder and certain of his family members, who are the Co-Chief Executive Officers and directors of the Company.  On January 5, 2012, MDC entered into a second amendment of lease (the “Second Lease Amendment”) with Vitamin Realty for its office and warehouse space in New Jersey increasing its rentable square footage from an aggregate of 74,898 square feet to 76,161 square feet and extending the expiration date to January 31, 2026.  This Second Lease Amendment provided for minimum annual rental payments of $533, plus increases in real estate taxes and building operating expenses.  On July 15, 2022, MDC entered into a third amendment of the lease (the “Third Lease Amendment”) with Vitamin Realty, increasing its rentable square footage to 116,175.  The Third Lease Amendment provides for minimum annual rental payments of $842, plus increases in real estate taxes and the building operating expenses allocation percentage and is effective as of July 1, 2022.

Rent expense and lease amortization costs for the three months ended March 31, 2024 and 2023 on these leases were $332 and $321 respectively, and for the nine months ended March 31, 2024 and 2023 were $974 and $958, respectively, and are included in cost of sales and selling and administrative expenses in the accompanying Condensed Consolidated Statements of Operations. As of March 31, 2024 and June 30, 2023, the Company had no current obligations to Vitamin Realty.  Additionally, the Company has operating lease obligations of $1,485 and $2,061 with Vitamin Realty as noted in the accompanying Condensed Consolidated Balance Sheet as of March 31, 2024 and June 30, 2023, respectively.

Other Operating Lease Liabilities. The Company has entered into certain non-cancelable operating lease agreements expiring up through May, 2027, related to office equipment.

As of March 31, 2024, the Company’s right-of-use assets, lease obligations and remaining cash commitment on these leases were as follows:

	Right-of-use Assets		Current Portion of Operating Lease Obligations		Operating Lease Obligations		Remaining Cash Commitment
Vitamin Realty lease	$	1,485	$	796	$	689	$	1,544
Warehouse lease		461		114		347		529
Transportation lease		59		16		43		68
Office equipment leases		15		9		7		16
	$	2,020	$	935	$	1,086	$	2,157

As of June 30, 2023, the Company’s ROU assets, lease obligations and remaining cash commitment on these leases were as follows:

	Right-of-use Assets		Current Portion Operating Lease Obligations		Operating Lease Obligations		Remaining Cash Commitment
Vitamin Realty lease	$	2,061	$	772	$	1,289	$	2,176
Warehouse lease		541		108		433		631
Office equipment leases		21		8		13		23
	$	2,623	$	888	$	1,735	$	2,830

As of March 31, 2024 and June 30, 2023, the Company’s weighted average discount rate and remaining term on operating lease liabilities were approximately 4.98% and 4.41% and 2.2 years and 2.9 years, respectively. 

Financed Lease Obligation. 

As of each March 31, 2024 and June 30, 2023, the Company’s weighted average discount rate for the outstanding finance lease obligation of $18 and $49, respectively is 0% and the remaining term on finance lease obligation is approximately 0.4 years and 1.2 years, respectively.  The related ROU asset and lease obligation are included in Property and Equipment, net and Finance Lease Obligation, respectively, in the accompanying Condensed Consolidated Balance Sheet.

Supplemental cash flows information related to leases for the nine months ended March 31, 2024, is as follows:

	Related Party - Vitamin Realty		Other Leases		Totals
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	632	$	166	$	798
Operating cash flows from finance leases		-		-		-
Financing cash flows from finance lease obligations		-		31		31

Supplemental cash flows information related to leases for the nine months ended March 31, 2023, is as follows:

	Related Party - Vitamin Realty		Other Leases		Totals
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	632	$	99	$	731
Operating cash flows from finance leases		-		-		-
Financing cash flows from finance lease obligations		-		25		25

Maturities of operating lease liabilities as of March 31, 2024 were as follows:

	Operating			Related Party			Finance
Year ending	Lease			Operating Lease			Lease
June 30,	Commitments			Commitment			Obligation		Total
2024, remaining	$	42		$	210		$	11	$	263
2025		169			842			7		1,030
2026		169			492			-		998
2027		169			-			-		641
2028		64			-			-		62
Total minimum lease payments		613			1,544			18		2,175
Imputed interest		(77	)		(59	)		-		(136	)
Total	$	536		$	1,485		$	18	$	2,039

(b) Legal Proceedings.

The Company is subject, from time to time, to claims by third parties under various legal theories. The defense of such claims, or any adverse outcome relating to any such claims, could have a material adverse effect on the Company’s liquidity, financial condition and cash flows.